KARACHI: Leading businessmen gathered at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) to analyse the looming threat of a Sri Lanka-like economic emergency as the dollar hit an all-time high of Rs224.92 against the local currency in the interbank market on Wednesday.

FPCCI President Irfan Iqbal Shiekh said the rupee’s free fall has reached a point where it has become a threat to national security as the letters of credit (LCs) for petroleum imports were being opened at a much higher rate than the interbank rate.

He feared that a serious law and order situation might emerge in the event of any fuel shortages for transportation and electricity generation. “We are not far from a Sri Lanka-like scenario and radical decisions are needed to reverse the situation,” he warned.

According to an FPCCI’s press release, leading businessman Aqeel Karim Dhedhi expressed his shock that despite the fact that many numbers are showing improvement over the last few weeks, such as global oil prices, declining edible oil prices and better supplies of many other commodities, the government has failed to rein in inflation.

Urge central bank to play role to end exchange rate volatility

The FPCCI chief emphasised that the State Bank of Pakistan (SBP) cannot continue with the free-floating exchange rate and has to apply regulatory tools to minimise speculation and uncertainty. He added that the country does not even have enough foreign exchange reserves to cover two months of imports.

Despite a foreign exchange bloodbath, the government has failed to appoint a governor for the SBP, which reflects poorly on the government’s seriousness in dealing with the situation, he said.

Patron Karachi Wholesalers Grocers Group (KWGA) Anis Majeed said the landing cost of imported pulses had increased by Rs7-8 per kg in the last 10 days due to continuous rupee deprecation against the dollar and its impact had not been passed to the wholesale rates by the traders due to uncertain future exchange rates. Traders import pulses under cash against documents rather than through opening letters of credit.

He said pulse imports already decreased by 29pc to 897,352 tonnes ($611m) in FY22 from 1.266m ($709m) in FY21. The average per tonne price rose to $681 from $560.

In a statement, Korangi Association of Trade and Industry (KATI) President Salman Aslam, said the business community had serious reservations about the government’s mysterious silence for not taking any steps to manage the declining economy.

He said that the value of the rupee was depreciating artificially, leaving the currency free-floating in the market and causing severe losses to the economy. Investors have lost confidence after the stock market crash and the negative rating of Pakistan by Fitch rating agency.

Mr Aslam predicted a storm of inflation if the rupee continued to fall against the dollar.

The president of the North Karachi Association of Trade and Industry (NKATI), Faisal Moiz Khan, urged the SBP to adopt effective strategies to stabilise the rupee and curb the continued appreciation of the dollar.

The SBP needs to play its role as a regulator to prevent a further rise in the dollar price, he said, fearing that Pakistani products would become uncompetitive in the world markets after the rising landing cost of imported raw materials in view of persistent rupee devaluation besides creating difficulties in timely fulfillment of export commitments.

Published in Dawn, July 21st, 2022